SoftBank slump not a ‘total disaster’ for Gulf wealth funds

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• Saudi Arabia’s Public Investment Fund invested $45bn
• Abu Dhabi’s Mubadala invested $15bn

The $23.1 billion quarterly loss announced by Japan’s SoftBank Vision Fund this week may not represent a “total disaster” for its Gulf investors, according to US-based experts.

Announced during President Donald Trump’s visit to Saudi Arabia in 2017, the Vision Fund is heavily backed by GCC sovereign wealth funds (SWFs).

Saudi Arabia’s Public Investment Fund (PIF) invested $45 billion and Abu Dhabi’s Mubadala shelled out $15 billion – giving the two Gulf SWFs a combined 60 percent stake of the $98.6 billion raised for the first of two mega Vision Funds.

The initial fund invested in technology brands such as ByteDance, Cameo, eFishery, OYO, Uber and WeWork.

• Mubadala in talks to buy asset manager Fortress from SoftBank
• 43 billion reasons why the US is key to Saudi’s wealth fund

“One would think that they have lost a lot of money. However, drilling down into the numbers tells us otherwise,” said Diego Lopez, managing director at Global SWF, a New York-based advisory specialising in SWFs.

Lopez pointed out that of the 98 companies the first SoftBank Vision Fund (SVF1) invested in, it has exited 18, realising a gain of $17.9 billion, delivering $8.1 billion for PIF and $2.7 billion for Mubadala.

Of the 80 left, Lopez said that the 57 private companies are valued at $6.5 billion more than the investment cost, while the 23 public companies have seen their value drop by $8.3 billion, such as China’s Didi and WeWork, and are likely to remain unrealised losses.

“SVF1 has until 2029 to realise all the investments, so I would not call it a disaster for its limited partnerships just yet,” he added.

While Lopez also pointed out that SoftBank has until November 2029 to claw back some of its remaining investments, Reuters reported on Tuesday that the company was accelerating the sale of its assets.

Reuters said SoftBank was looking to sell its stake in digital personal finance company SoFi Technologies, was in discussions to sell asset manager Fortress, and had sold its shares in T-Mobile US.

Asset sale

Tokyo-based Kirk Boodry, founder of Redex Research, said the Seoul-headquartered e-commerce firm Coupang and American food delivery firm DoorDash would be good potential exits, but that most of the Vision Fund’s “portfolio is underwater, making the case to sell harder to justify”.

Rachel Ziemba, founder of New York-based geo-economic advisory firm Ziemba Insights, said the latest quarterly loss would not make “a major difference reputationally as it just confirms challenges that SoftBank had already signalled, and comes at a time when a lot of tech companies are facing near-term losses.” 

“That said, those at SoftBank were particularly inflated,” she added.

“The losses from SoftBank are not good for them and definitely highlighted challenges of rapidly scaling up and deploying a lot of capital, especially for the PIF,” said Ziemba.

But she believed it would have limited near-term impact for the SoftBank Vision Fund’s Gulf backers. 

“They weren’t expecting dividends or/payouts from the funds any time soon and arguably already wrote down some expected returns,” she said.

10 tech companies SoftBank Vision Fund has invested in

1. 10x Genomics
   A Californian biotechnology company that designs and manufactures gene sequencing technology used in scientific research. Listed on the Nasdaq and generated $490 million in revenue in 2021.
2. Aurora
   A Pittsburgh-based self-driving vehicle technology company, founded in 2017 by a Google executive. Listed on the Nasdaq, it generated $83 million in revenue in 2021.
3. Coupang
   Based in Seoul, the e-commerce company is known as the “Amazon of South Korea”. It launched in IPO in New York in March last year and generated $18 billion in revenue in 2021.
4. DiDi
   Chinese vehicle hiring platform that has expanded into a super app, offering food delivery, payment and other services to global users. Listed in New York, it generated revenue of $21.6 billion in 2020.
5. Guardant Health
   Californian oncology company focused on helping conquer cancer globally through use of its proprietary blood tests, vast data sets and advanced analytics. It is expecting 2022 revenue to be around $470 million.
6. Opendoor
   Headquartered in San Francisco, it is an online platform that buys and sells residential real estate. Listed on the Nasdaq it had revenue of $8 billion in 2021.
7. OYO
   Indian multinational hospitality chain of leased and franchised hotels, homes and living spaces. Available in around 800 global cities, it had revenue of around $520 million in 2021.
8. Slack
   A messaging program, launched in 2013 and available in ten languages. Developed for office use, it has expanded into the personal communication arena. It was sold to Salesforce in June 2021 for $27.7 billion.
9. Uber
   The disruptive ride-hailing app which has expanded worldwide to 72 countries since it launched in 2009. Listed in New York it had revenue of $17.46 billion in 2021. SoftBank sold its remaining stake earlier this year and claimed it had made a profit.
10. WeWork
    New York-based company offering workspace to startups in 756 global locations. Following a high-profile failed IPO in 2019, founder Adam Neumann resigned. The company’s valuation has fallen from $47 billion in 2019 to around $5 billion this year.